Investors looking for stocks in the Manufacturing – Construction and Mining sector might want to consider either Terex (TEX) or Caterpillar (CAT). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both Terex and Caterpillar have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TEX currently has a forward P/E ratio of 14.39, while CAT has a forward P/E of 39.26. We also note that TEX has a PEG ratio of 1.09. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. CAT currently has a PEG ratio of 1.91.
Another notable valuation metric for TEX is its P/B ratio of 1.65. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, CAT has a P/B of 23.94.
These are just a few of the metrics contributing to TEX’s Value grade of B and CAT’s Value grade of F.
Both TEX and CAT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TEX is the superior value option right now.
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Terex Corporation (TEX) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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